Could A2 MILK FPO NZ (ASX: A2M) be a better buy than Bellamy’s Australia Ltd (ASX: BAL)?

Over the past three months, shares in the a2 Milk Company have indeed proven to be a better investment than those in Bellamy’s, rising 175% compared to ‘just’ 78% for Bellamy’s.

This morning, shares in a2 Milk again jumped higher, up more than 3% at one point, while Bellamy’s edged up 1.45%.

The rise in share price may be attributable to an ASX announcement made by a2 Milk, detailing recent director buying in the company.

On 31 December 2015, a2 Milk Executive Chairman, David Hearn, bought 50,000 shares for NZ$101,000 on market. The purchased shares were then disposed, “by way of gift to family member”, the ASX announcement read.

As long-term investors, we like to see directors buying shares because, as the old adage goes, ‘insiders sell shares for many reasons, but they buy shares for just one’. When a director buys shares to gift to a family it is arguably just as good as them buying shares for themselves, if not better.

However, a2 Milk CEO, Geoffrey Babidge, sold 500,000 shares on market on 30 December 2015. As noted above, there could be other reasons behind his decision to sell.

Is a2 Milk a better buy than Bellamy’s?

Observing insider ownership is only a small part of an overall investment thesis. And as we detailed here, the opportunity for both a2 Milk and Bellamy’s is enormous.

However, the risk-reward opportunity for new investors seeking an entry into either company has narrowed significantly in recent months, as a result of their surging share prices. While both companies are worthy of a spot on watch lists, I’m holding off buying shares in Bellamy’s and a2 Milk, for now.

A better buy than Bellamy's and a2 Milk

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Motley Fool writer/analyst Owen Raszkiewicz has a financial interest in Bellamy's.

Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia owns shares of Bellamy's Australia. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.